FERC on April 8 approved PJM’s cost allocation for a $5 billion slate of transmission upgrades aimed at resolving reliability violations posed by growing data center load in Northern Virginia and generation retirements in Maryland (ER24-843). 

The commission dismissed as out-of-scope protests filed by the Maryland ratepayers and the state Office of People’s Counsel that Virginia should bear the full cost of transmission upgrades to serve data center load. The OPC argued the proliferation of data centers in Loudoun County and the surrounding area — known as Data Center Alley — has been fueled by incentives provided by Virginia and that the transmission needed should be classified as a public policy objective with the costs fully assigned to that state. 

Several Maryland residents urged the commission to initiate a proceeding under Section 206 of the Federal Power Act to consider whether the PJM cost allocation process remains just and reasonable, also arguing that the data centers are the result of Virginia’s policy objectives. They also argued that the stakeholder process is unfriendly to the participation of average consumers. 

The PJM Board of Managers approved the projects to become part of the RTO’s Regional Transmission Expansion Plan (RTEP) on Dec. 11, greenlighting new lines from the 502 Junction and Otter Creek substations in Pennsylvania, through Maryland and into Northern Virginia. Additional lines will supply power to the Alley from Dominion Energy’s Morrisville substation in Southern Virginia, and from the Peach Bottom substation in Pennsylvania to the Baltimore area to resolve violations related to the retirement of the 1,295-MW Brandon Shores coal generator. (See PJM Board Approves $5 Billion Transmission Expansion.) 

The commission said its review of the cost allocation for RTEP projects is limited to whether PJM correctly applied its tariff. The issues raised by the OPC and ratepayers around the mechanisms by which PJM determines cost allocation are beyond the scope of its review and more appropriately would be considered through a separate complaint that the RTO’s tariff is not just and reasonable. 

Even were a complaint to be filed, the commission expressed skepticism regarding the concept of assigning states the cost of building transmission to serve growing load, even that which may be the result of state incentives. It said the State Agreement Approach is the only structure for assigning transmission costs to an individual state and only if it voluntarily agrees to pay those costs to facilitate its public policy objectives. 

Commissioner Allison Clements wrote a concurrence going further, arguing that determining which transmission needs are the result of discrete state policies for the purpose of cost allocation would run contrary to the principles of regional transmission planning and would be “impractical and unworkable.” 

The OPC’s “argument also overlooks the reality that myriad state and local (and, for that matter, federal) public policies affect either the demand for or supply of electric power,” Clements wrote. “Virginia is certainly not the only state with economic development policies that are increasing the demand for power. Likewise, every state makes policy and/or regulatory decisions that affect which generating facilities provide supply to meet demand. Assigning transmission costs by attempting to parse countless public policies to determine whether and how each contributes to the need for transmission by affecting demand or supply in the power system is an impractical task that is not required by the Federal Power Act.” 

Commissioner Mark Christie also concurred, as PJM followed its tariff, but he argued there may be merit to deeper consideration of how state policies affect RTOs’ transmission planning. 

“I believe that the time has come for this commission to take the lead in its convening role to initiate a proceeding, such as a Notice of Inquiry, a series of technical conferences or by initiating an FPA Section 206 proceeding outside this docket, posing such important questions, among others, as: What is the proper definition of a public policy transmission project? Does the definition of public policy transmission project need to be changed for purposes of regional cost allocation? How should public policy transmission projects be cost allocated in a multistate RTO?” Christie wrote.  

“In my view the states themselves need to be at the forefront of deciding these questions, as it is their own state policies that are largely making these questions unavoidable, as these two recent PJM RTEP cases graphically illustrate,” he said.